Bajaj Auto share buyback: Recommendation for retail investors, 2 scenarios, likely returns & more

Axis Securities in its latest note recommended existing Bajaj Auto Ltd investors to tender shares in the forthcoming share buyback. For new investors, it suggested them to participate in the buyback and hold the remainder of their stock holdings from a long-term perspective.

Bajaj Auto has announced to buy back 40 lakh shares at what Axis Securities called "an attractive price" of Rs 10,000 per share, with a total aggregate not exceeding Rs 4,000 crore. The number of shares represent a substantial 16.33 per cent of the aggregate paid-up share capital of the company. The buyback will be executed through a tender route.

For small shareholders with investment not exceeding Rs 2 lakh, Bajaj Auto reserved 15 per cent of total tender offer. Axis Securities suggested two scenarios. It said a minimum acceptance ratio (MAR) is projected at 4 per cent when all participants tender 100 per cent of their shares. In the scenario II, it said assuming a 30 per cent participation rate by small retail holders, the minimum acceptance ratio is expected to be an impressive 13 per cent.

"We anticipate a return of 2-4 per cent in the next 3-4 months, assuming the CMP is the post-buyback price," it said.

Read more: Bajaj Auto shares expensive? Sell on rise, stock pricing in near-term positives, says SMIFS
 

In the case of general category, with investors whose Bajaj Auto investments exceed Rs 2 lakh, it suggested a scenario where the minimum acceptance ratio is 1 per cent with the assumption of 100 per cent participation. In the second scenario, it said participants unlikely to participate are eliminated from the total offer calculation, resulting in a minimum acceptance ratio of 2.5 per cent.

"We project a return of 1 per cent in the next 3-4 months, assuming the CMP is the post buyback price," it said for general category investors.

Axis Securities said it expects volumes of the two-wheeler industry to grow in high single-digits in FY25, driven by better rural demand, a turnaround in the economy segment, and continuing growth in executive/premium segments.

"Bajaj Auto's revenue growth in FY25/26 is likely to be supported by strong volume performance and better realizations. EBITDA margins are expected to expand slightly on a better scale. Bajaj’s strategy is to drive profitable growth in the 125cc+ segment through product differentiation and sharp positioning. Six new launches in the next six months aim to surpass the company’s current 30% market share in the mid-segment. Bajaj aims for steady export recovery with QoQ improvement in sales across various markets," it said.

Also read: Bajaj Auto share buyback: What retail investors need to know about Rs 4,000 crore offer